That is, check that for any strictly positive p1… Show more Verify that Hicksian and Walrasian demand coincide. That is, check that for any strictly positive p1, p2,and w, h*1 (p1; p2; v(p1; p2; w)) = x*1 (p1; p2; w) and h*2 (p1; p2; v(p1; p2; w)) = x*2 (p1; p2; w) and check that for any strictly positive p1, p2,and v is in [u (0);supx2Rn + u (x)] x*1 (p1; p2; e(p1; p2; v)) = h*1 (p1; p2; v) and x*2 (p1; p2; e(p1; p2; v)) = h*2 (p1; p2; v). • Show less
The following income distribution data are for Brazil. Quintile Percent Share Lowest 20% … Show more The following income distribution data are for Brazil. Quintile Percent Share Lowest 20% 3.0% Second quintile 6.9% Third quintile 11.8% Fourth quintile 19.6% Highest 20% 58.7% Highest 10% 43.0% (a) What are the cumulative income distributions by quintiles? (b) Explain what the Gini coefficient is. (c) Brazil’s national income is about $300 billion. What is the approximate dollar income of the bottom 20%? Bottom 40%? (d) Brazil’s population is approximately 150 million. Suppose that each household makes the average income for its quintile. What is the level of poverty if the poverty line is $400 per capita? Calculate the average income shortfall and the poverty gap (e) Suppose one percent of national income were transferred from the richest 20% of households to the poorest 20% of households. Explain clearly what happens to inequality (discuss what happens to the percent share of income to each quintile) (f) Under the same transfer, what is the effect on poverty? Calculate and discuss what happens the income shares, average income shortfall, and the poverty gap. Consider the following distribution of income in a 12-person economy, with the modern urban wage = 10, the traditional rural income = 2, and the informal urban wage = 4: (2,2,2,2,4,4,4,4,10,10,10,10). (a) Suppose all rural incomes increase to 3, other things equal. How would this type of growth be characterized? Why? what will happen to the income shares of each quintile? • Show less
Did you know that many large countries utilize a national sales tax, or value added tax, to raise re… Show more Did you know that many large countries utilize a national sales tax, or value added tax, to raise revenues? What if, -in an effort to FIX THE ECONOMY, the U.S. decided to do this? This week, you are tasked with exploring the proposition of implementing a national tax on consumption. As you work on your proposal, please be sure to answer the following questions: What other countries are doing this and to what degree of success? How would this work? What/who would and what/who would not be taxed? Who wins (and to what extent)? Who looses (and to what extent)? • Show less
Mars and Hershey’s dominate the domestic chocolate candy bar business. In this mature market, advert… Show more Mars and Hershey’s dominate the domestic chocolate candy bar business. In this mature market, advertising by individual firms does little to convince more people to eat candy. Effective advertising simply steals sales from rivals. Big profit gains could be had if these rivals could simply agree to stop advertising. Assume Mars and Hershey’s are trying to set optimal advertising strategies. Mars can choose either row in the payoff matrix defined below, whereas Hershey’s can choose either column. The first number in each cell is Mars payoff; the second number is the payoff to Hershey’s. This is a one-shot, simultaneous-move game and the first number in each cell is the profit payoff to Mars. The second number is the profit payoff to Hershey’s. A. Briefly describe the Nash equilibrium concept. B. Is there a Nash equilibrium strategy for each firm? If so, what is it? • Show less
Explain why industry expansion in response to rising prices will put even more upward pressure on pr… Show more Explain why industry expansion in response to rising prices will put even more upward pressure on price in the cattle price cycle. What happens to finally cause the turnaround at the peak of the cattle price cycle? • Show less
T Bank offers to pay 2% per year, annually compounded interest on savings deposit. The Wells… Show more The BB&T Bank offers to pay 2% per year, annually compounded interest on savings deposit. The Wells Fargo Bank pays 2% per year, quarterly compounded interest. A man who has $10000 to put in a savings account will leave all money in the account for 2 years. Calculate the amount he would have at the end of 2 years from each bank. • Show less
11. Suppose the following is shows the variable costs of the final manufacturing division of a produ
6. Consider a copy shop with annualized fixed costs of $1000 and variable cost of $0.03 per page. Th
Two firms (A and B) are planning to produce a new soft drink for the summer. The soft drinks produce… Show more Two firms (A and B) are planning to produce a new soft drink for the summer. The soft drinks produced by the two firms can differ only in the level of sugar, aside from that they will be exactly equal. Suppose firm A chooses to produce a soft drink with 0g of sugar and firm B chooses to produce a soft drink with 50g of sugar. The marginal cost of producing soft drinks is $1. There are 1000 consumers in this market. Consumers differ in their preference for sugar and are uniformly distributed according to their preference for sugar. Consumers with the lowest valuation for sugar prefer a soft drink with 0g of sugar, whereas consumers with the highest valuation for sugar prefer a soft drink with 50g. So, preferences for sugar are between 0g and 50g. Consumers get a disutility (in monetary value) of $0.10 for each gram of sugar different from their preferred level. Each consumer reservation value for the soft drink with the most preferred level of sugar is $10. The two firms compete for consumers by setting prices. Firm A sets the price PA first and then firm B sets the price PB after observing PA. Consumers buy the soft drink that provides the highest consumer surplus. (a) What prices will firms set in equilibrium? To get it right, normalize everything to be between 0 and 1. (b) What are the profits of each firm in equilibrium? (c) Suppose firm A invests in a new technology that reduces its marginal cost to $0.80. The marginal cost of firm B is still $1. What prices will firms set in equilibrium in this case? • Show less
